Tuesday, March 31, 2009

Sales Tax Harmonization

In the latest provincial budget, the Ontario government is proposing to "harmonize" (combine) the GST (5%) and PST(8%) into one single tax rate of 13%. It is proposed that this new tax would come into affect July 10, 2010. In doing so, increased taxes would be payable on a variety of goods and services including a number of those involved with real estate transactions such as real estate commissions, legal fees, moving expenses, home inspection costs and so on. The Ontario Real Estate Association (OREA) has come out strongly opposed to the harmonized tax structure stating that it will erect barriers to home ownership. In a news release, Pauline Aunger current President of OREA states:"In the last decade, Ontario’s homeowners have faced a barrage of new costs," said Aunger. "From municipal land transfer taxes to sky rocketing property taxes, homeowners are being pushed to the brink to accommodate increasing demands from government. A harmonized sales tax is yet another cash grab on Ontario’s already overtaxed homeowners." While her statement may be true, increased taxes have become all too commonplace in our society wherein they are begrudgingly accepted and life moves on with many consumers hardly skipping a beat when it comes time to make a purchase, large or small. Let's face it we've already adjusted to the GST, Toronto homebuyers became subject to additional municipally imposed land transfer taxes last year and so on. OREA claims that on average, the harmonized tax will add about $2,000 in added expense to each real estate transaction. Will this curtail consumers from buying a home? Hardly. At best it may delay some first-time buyers in making a purchase as they further save the additional money needed to cover the increased closing costs but it will hardly stop residents of Ontario from pursuing the fulfillment of homeownership. Homeownership has by-and-large rewarded many with an excellent rate of appreciation in their home's value. Unlike in the U.S. there is no capital gains tax on the profit taken from the sale of your primary residence. So the question remains, will this new tax hurt the real estate market and or delay the rate of recovery from the current slowdown? Personally I doubt it and the OREA claims may well be proven false. OREA also recently took aim at Ontario's Green Energy Act and the proposed mandatory requirement for homeowners selling their homes to have a home energy audit conducted. As with the budget, OREA argued that these audits with a cost of approximately $300 would serve to "tax" home sellers while giving buyers an unfair advantage in price negotiation. With most real estate transactions in the province now totalling tens of thousands of dollars neither a $300 home energy audit nor additional taxation on real estate related services are going to derail a recovery in the housing market. We have become a society that has become somewhat numbed to increased taxes. The Ontario Real Estate Association (OREA) needs to in my opinion, be more prudent in keeping issues in perspective and picking their fights more wisely. Everyday those of us that practice real estate must on an ever-increasing basis, demonstrate the value proposition that we as REALTORS® bring to the real estate transaction for the fees we charge, which can often run into thousands of dollars. A few extra hundred dollars in additional taxes on a $200,000 or $300,000 transaction hardly becomes an issue and will unlikely have any prolonged affect on the residential housing market.

My Profile

Rick relocated to Collingwood from Toronto in 1985 through a transfer with Goodyear Canada. In 1987 Rick was recruited by a major client of Goodyear’s, managing their Canadian business based in Barrie before moving to Chicago in 1992 as Vice President of Sales & Marketing. Upon returning to Canada in 1996, Rick ran an industrial products manufacturing company in Stratford, Ontario.
In 1998 Rick returned to Collingwood with his two children. Rick is a licensed real estate Broker with Royal LePAGE Locations North in Collingwood and holds his MVA designation (Market Value Appraiser-Residential). He is an active volunteer in the community serving several years on the Board of Directors with the Collingwood Chamber of Commerce as Treasurer, 6 years on the Board of Directors for the Southern Georgian Bay Association of REALTORS® of which he is the Past President (2008) and currently serves on a committee with the Ontario Real Estate Association. Rick is a diverse executive manager with extensive experience in strategic planning, manufacturing, finance, human resources and quality assurance management.